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TMI Blog2016 (6) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... t income had escaped assessment. In fact, he was compelled to go against his own legal belief and issue notice, which was wholly impermissible under law. In fact, the spirited defence put forward by the Assessing Officer before the Audit Party gives credence to the petitioner's contention that his entire claim was minutely examined by the Assessing Officer during the original assessment proceedings. - Decided in favour of assessee - SPECIAL CIVIL APPLICATION NO. 3399 of 2016 - - - Dated:- 15-6-2016 - MR. AKIL KURESHI AND MR. A.J. SHASTRI, JJ. FOR THE PETITIONER : MR RK PATEL, ADVOCATE for MR DARSHAN R PATEL, ADVOCATE FOR THE RESPONDENT : MR RK PATEL, ADVOCATE for MR DARSHAN R PATEL, ADVOCATE ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. In this petition, the petitioner has challenged a Notice dated 24.12.2014 issued by respondent no. 1 Assessing Officer seeking to reopen the assessment of the petitioner for the Assessment Year 2010-11. 1.1. The brief facts are as under :- 1.2. The petitioner is a Company registered under the Companies Act and is engaged in the business of manufacturing specialized medical equipments. For the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubtful debts/ written back/ transfer to bad debts of ₹ 2,78,47,717/- and provision for doubtful loan, advances and deposits of ₹ 73,77,830/- totalling ₹ 3,52,25,547/- . As per the IT Act no such provisions were admissible. This has resulted into under assessment of ₹ 3,52,25,547/- . 4. In view of the above, I have reason to believe that the income to the tune of ₹ 8,53,30,357/- chargeable to tax has escaped assessment within the meaning of Section 147 of the I.T. Act, 1961 for A.Y. 2010-11. 2. Upon receipt of the reasons recorded by the Assessing Officer, the petitioner raised objections to the process of reopening under a communication dated 09.01.2016. Such objections, were however, rejected by the Assessing Officer by order dated 05.02.2016. Hence, the petition. 3. From the reasons recorded by the Assessing Officer, it could be gathered that he had pressed in service three grounds in order to resort to the process of reopening of the assessment. Briefly stated, these grounds were (1) that the assessee had claim deduction of ₹ 1.63 crores (rounded off) under the provision of sales return. According to the Assessing Officer, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7.12.2012 with respect to this claim, the Assessing Officer called upon the assessee to provide the following details : 2. In this connection, you are requested to furnish the following details/ information/ explanation, which are required for completion of assessment proceedings: ( i) Furnish details of bad debts written off in the previous year relevant to A.Y. 2010-11, i.e. name and address of the parties and nature of transaction made by you with the said party along with documentary evidence in A.Y. 2009-10. (ii) During the year under consideration, you had debited an amount of ₹ 4,50,32,315/- as Bad Debt Expenses for which you have submitted name and amount of bad debt written off. From the said details it is found that during the year you have written off bad debt only ₹ 3,37,24,816/- . You are, therefore, requested to showcause as to why the differential amount of ₹ 1,13,07,499/- should not be disallowed and added to your total income. 5.2. In response to such a query, the petitioner on 18.12.2012 wrote to the Assessing Officer as under : 1. The details of bad debts written off during the year under consideration are as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4, No.35, MohajerAlley, Irashahr Street, Tehran Iran 8,608,614 Scitech Medical Products, Brazil Rua 53, No220,Qd-B-17, Lt.22, JardimGoias Goiania Go Brail Zip Code 74,810210. 11,984,460 SAL Hospital, Ahmedabad Opp. Doordarshan,Drive-in-Road, Ahmedabad-380 054 Gujarat, India. 525,665 Balaji Hospital, Mumbai Victoria Road, Cross Lane III, Byculla (E) Mumbai, MH 400 027 65,000 K.E.M. Hospital, Mumbai Acharya Donde Marge, Parel East, Mumbai, Maharashtra 400012 58,000 Reliance (H.N.Hospital) Mumbai Padmashri Gordhan Bapa Chowk, Rajaram Mohan Roy Road, Charni Road, Mumbai 405,000 Total 33,724,816 5.3. Once again, under communication dated 15.03.2013, the petitioner justified this claim as under : The allowable expenses in respect of business incomes are covered under Section 30 to 37 of the Act, Section 36(1) (vii) of the Act, specifically dealt with allowable expenses for bad debts or in ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubtful loans and advances. In this context, the assessee in the letter dated 10.12.2011 to the Assessing Officer had conveyed as under : 10. Details of provision for debts, provisions for doubtful loans and advances and provision are separately enclosed. The provision for deposits, provisions for insurance claim receivable are made adhoc on the basis of past experience. However, all the provisions are added back to total income in computation of total income. 5.6. Thus, even this claim of the assessee came up for consideration before the Assessing Officer in the original assessment proceedings. Here again, the Assessing Officer in the final order of assessment had made partial disallowances. Thus, this claim was also scrutinized by the Assessing Officer in the original assessment proceedings. 6. Coming to the first ground mentioned in the reasons, we may recall, it pertains to deduction of the provision of sales return of ₹ 1.63 crores claimed by the assessee. According to the Assessing Officer, this was neither accrued nor a known liability and was therefore, not an admissible deduction. In this context, the assessee contends that even this claim had come up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, stopped using the catheters which were found to be defective and returned unused catheters imported from abroad and also recalled the defective material from the market. Such material was received and destroyed because it was not safe for human use and that therefore, the liability was ascertained. 7.1. The Assessing Officer, thus, clearly did not agree to the view point of the Audit Party that the claim was irregularly granted. In fact, in his opinion, after going through the detailed explanation, the same was correctly allowed. Despite this, it appears that the Audit Party insisted upon corrective measures being taken by the Assessing Officer. The Assessing Officer, therefore, on 30.12.2013 wrote to the Director, Principal Director, Audit (Central) and once again gave detailed reasons why, in his opinion, when the company had recalled the material, it was ascertained liability or known liability and the same therefore, cannot be added back to the profit of the company. It was, in this background, that the Assessing Officer once again wrote to the Commissioner of Income-Tax on 28.02.2014 completely disagreeing with the Audit Party and after giving detailed reason ..... X X X X Extracts X X X X X X X X Extracts X X X X
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